21/12/12 (Bernama) - The commodity sector is expected to face uncertainty next year due to factors like high inventory (palm oil) and the developments in the global economy which will continue to influence prices and sentiment.

Analysts and traders were mixed in their views on how prices would move next year as the major economies in Europe, US and China were expected to impact the commodity markets.

An analyst said while the worst may be over for the debt crisis in Europe this year, there would still be concern about how Europe would be able to successfully carry out effective measures to achieve economic recovery.

The European Central Bank has warned of a gloomy economic growth for the 17 EU countries in the eurozone next year.

In US, the policymakers were struggling to strike a deal to avoid the fiscal cliff. However, there were hopes that they could resolve the stand-off after weeks of gridlock.

Kenanga Research analyst, Alan Lim Seong Chun, forecast that the crude palm oil (CPO) physical prices would remain almost flat next year.

"They are expected to move close to an average price of RM2,850 per tonne from about RM2,900 in 2012. The main concern now is whether the current high inventory level could be reduced," he told Bernama today.

The CPO inventory hit a historical high of 2.56 million tonnes in November.

Traders said the high inventory was expected to be reduced next year with the zero export duty.

They said the current 23 per cent export tax discouraged CPO exports except for the duty-free export quotas.

Another plantation analyst expected CPO prices to average RM3,050 per tonne next year from RM2,800 in 2012, to be driven mainly by global economic recovery.

The CPO prices declined to its lowest level in three years in the middle of December due to record inventory level.

In March, however, the prices hit a 13-month peak due to shortage in supply of vegetable oils following the fall in rival soyabean output from South America.

On the outlook of the Malaysian rubber market, a trader said the prices would likely move within a tight range next year, with external factors such as the eurozone economic woes and US economy continuing to impact them.

Rubber prices rose during the first two quarters of the year due to improvement in the US economy.

However, they were on downtrend for the rest of the year due to the weaknesses in the global economy, expecially the financial crisis in Europe and US.

Industry players said Malaysia, a major producer of medical gloves and condom, would continue to boost rubber exports as the financial crisis in Europe and sluggish US economy would have little impact on demand for condoms and medical gloves.

On the Kuala Lumpur Tin Market (KLTM), traders said it has the potential to perform better next year based on expectations of a rebound in demand from China and tight supply mainly from major producer, Indonesia.

Among the six metals on the London Metal Exchange, tin was the best performer for this year.

Tin price on the KLTM climbed to an eight-month high in the middle of December, boosted by strong buying from foreign buyers.

As for cocoa, the industry players expected prices to firm next year due to tight supply after the European financial crisis reduced cocoa grindings from the region.

Malaysian exports of cocoa of over RM4.2 billion were expected to be maintained for this year despite the slowdown in cocoa production, they said.